How Does a Lack of Fungibility Negatively Impact a Currency?

A lack of fungibility means that individual units of the currency are not interchangeable, often due to their visible transaction history. This can lead to certain coins being 'tainted' or 'blacklisted' if they have been involved in illicit activity.

If a coin is deemed non-fungible, merchants or exchanges may refuse to accept it, or accept it at a discount. This undermines the currency's universal acceptance and stability.